The chief energy policy adviser to state and federal governments has sounded the alarm over comparator websites offering consumers advice about their electricity plans, saying the sites lack transparency, and possibly inflate power prices.

The Australian Energy Market Commission’s annual review of the state of retail competition in the energy market says commercial comparator sites like iSelect, Compare the Market and Electricity Wizard are being used more frequently by consumers to chase discounts given power prices have been high.

It notes the comparator sites simplify the retailer and plan choice for consumers, and assist people in changing their plan or retailer, but the AEMC warns “the sites lack transparency in how many retailers and offers they compare”.

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“Some compare as few as four retailers. Consequently, they may recommend a plan that is not the best available in the market, given a customer’s circumstances. As the sites charge retailers for the channel-to-market service they provide, these costs are also likely to flow into retail prices”.

The report released on Friday – which comes ahead of a separate review of electricity competition expected later this month from the Australian Competition and Consumer Commission – says consumers can make savings worth hundreds of dollars by switching the energy plans from the median standing offer to the cheapest market offer.

The report quantifies the potential electricity savings by state: South Australia $832, Victoria $574-$652, South East Queensland $504, New South Wales $365-$411, Australian Capital Territory $273. In gas the savings were Victoria $690-$751, Australian Capital Territory $192, New South Wales $177-$185, South Australia $108-$161, South East Queensland $31-$45.

Switching rates are highest in Victoria (27%) and south-east Queensland (25%). In New South Wales the switching rate is 19%, South Australia is 16%, and the Australian Capital Territory is 6%.

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But while the benefits are there to be had, the AEMC chairman John Pierce says competition in the retail market “is currently not delivering the expected benefits to consumers” because retail offers, particularly discounting behaviour, are confusing for consumers.

The report says the industry practice of marketing campaigns focused on percentage discounts off standing offers that are inconsistent between the various electricity and gas retailers makes it very difficult for consumers to compare offers.

It notes that “a higher percentage discount does not always align to a cheaper customer outcome” and says consumers can be further bamboozled because discounts apply to different parts of the bill, with some only applying to usage and others to the whole bill.

Pierce notes that after a period of stable or improving customer satisfaction, levels of residential and small business consumer confidence and satisfaction have declined significantly over the last year.

“Complex pricing plans, conditional offers, discounts from bases that vary by retailer, and an increasing trend towards discretionary win-back marketing have created consumer confusion and dissatisfaction,” the AEMC chairman says.

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“Retailer inertia and a lack of transparency have emerged as significant barriers preventing consumers gaining the maximum benefits possible in terms of prices and services”.

The market is also concentrated. The market share of the big three energy retailers is declining, but still remains around 75% in most jurisdictions, except for Victoria where it is around 60%.

Pierce notes that Australian consumers are increasingly opting out of a system they find hard to navigate, choosing to do-it-yourself with rooftop solar systems and batteries.

The report notes there were 154,877 residential solar PV installations in 2017, an increase of 25% on the previous year, with 1.8 million Australian households now using solar panels.

The Turnbull government has been under acute political pressure because of high power prices, and that pressure makes it more difficult for the energy minister Josh Frydenberg to resolve a policy safeguarding reliability and emissions reductions in the electricity grid.

Last December, the AEMC predicted wholesale electricity costs would fall in 2018-19 and 2019-20, with a reduction in the order of 12% due to approximately 5,300 MW of new committed and expected generation entering the national electricity market – the majority of which is renewable generation (4,900 MW).

Wholesale electricity prices have fallen in 2018, which is beginning to flow through retail prices, but the reductions thus far have been modest.